China's electricity production ranks first in the world. Why can't it be used to mine BTC?

Source: Lawyer Liu Honglin

I didn't understand electricity at all

During the May Day holiday, self-driving through the Hexi Corridor, from Wuwei to Zhangye, Jiuquan, and then to Dunhuang. Driving on the desert highway, wind turbines often appear on both sides of the road, silently standing on the desert, very spectacular, like a futuristic Great Wall.

*Image source: Internet

A thousand years ago, the Great Wall guarded the border and territory. Today, the wind turbines and photovoltaic arrays guard the energy security of a country and the lifeline of the next generation industrial system. Sunlight and wind have never been so systematically organized, embedded in national strategy, and become part of sovereign capability as they are today.

In the Web3 industry, everyone knows that mining is a fundamental existence, one of the most primitive and robust infrastructures in this ecosystem. Every switch between bull and bear markets, every prosperity on the chain, cannot be separated from the continuous operation of mining machines. And every time we talk about mining, the most discussed topics are the performance of the mining machines and the electricity price - whether mining can make money, how high the electricity price is, and where to find low-cost electricity.

However, when I see this thousands of miles long power line, I suddenly realize that I don't understand electricity at all: where does it come from? Who can generate electricity? How does it transmit from the desert to thousands of miles away, who will use it, and how should it be priced?

This is my cognitive blank, and maybe some of my friends are equally curious about these issues. So, I plan to use this article to give a systematic review, from China's power generation mechanism, grid structure, power trading, to terminal access mechanism, to re-understand the concept of electricity.

Of course, this is the first time Lawyer Honglin has come into contact with this completely unfamiliar topic and industry, so there are bound to be shortcomings and omissions. Please provide valuable feedback, partners.

How much electricity does China actually have?

Let's first look at a macro fact: According to the data released by the National Energy Administration in the first quarter of 2025, China's total electricity generation reached 9.4181 trillion kilowatt-hours in 2024, a year-on-year increase of 4.6%, accounting for about one-third of the global electricity generation. What does this mean? The total annual electricity generation of the entire European Union is less than 70% of China's. This means that not only do we have electricity, but we are also in a dual state of "electricity surplus" and "structural restructuring".

China not only generates more electricity, but the way electricity is generated has also changed.

By the end of 2024, the national total installed capacity reached 3.53 billion kilowatts, a year-on-year increase of 14.6%, with the proportion of clean energy further increasing. The newly installed photovoltaic capacity is about 140 million kilowatts, and the newly installed wind power capacity is 77 million kilowatts. In terms of proportion, in 2024, China's newly installed photovoltaic capacity accounted for 52% of the global total, and the newly installed wind power capacity accounted for 41% of the global total. In the global clean energy landscape, China is almost a "dominant role".

This growth is no longer concentrated solely in traditional energy conservation, but is gradually tilting towards the northwest. Provinces such as Gansu, Xinjiang, Ningxia, and Qinghai have become "new energy powerhouse" provinces, gradually transitioning from "resource exporting areas" to "major energy production areas." To support this transformation, China has deployed a national-level new energy base plan in the "desert, Gobi, and barren areas": concentrating over 400 million kilowatts of wind power and photovoltaic installations in desert, Gobi, and barren areas, of which the first batch of approximately 120 million kilowatts has been included in the "14th Five-Year Plan" special planning.

*Asia's first, Dunhuang's first voyage, a 100-megawatt molten salt tower solar thermal power plant (image from the internet)

At the same time, traditional coal-fired power has not completely phased out, but is gradually transforming into peak-shifting and flexible power sources. Data from the National Energy Administration shows that by 2024, the national installed coal-fired power capacity will increase by less than 2% year-on-year, while the growth rates of photovoltaic and wind power will reach 37% and 21% respectively. This means that the pattern of "coal as the foundation, green as the main theme" is taking shape.

From the perspective of spatial structure, the overall balance of energy and power supply and demand will be achieved in 2024, but regional structural surplus still exists, especially in some periods in the northwest region, there is a situation of "excess electricity that cannot be used", which also provides a real background for our later discussion on whether "Bitcoin mining is an export way of power redundancy".

In short, China currently does not lack electricity, what is lacking is "adjustable electricity", "consumable electricity", and "profitable electricity".

Who can send electricity?

In China, generating electricity is not something you can do as you please. It does not belong to a purely market-oriented industry, but more like a 'franchise operation' with policy entry and regulatory ceiling.

According to the Regulations on the Administration of Power Business Licenses, all units wishing to engage in power generation business must obtain a Power Business License (Generation category). The approving authority is usually the National Energy Administration or its dispatched agencies, depending on the project scale, region, and technological type. The application process often involves multiple cross evaluations:

• Does it comply with national and local energy development plans?
• Has the land use, environmental impact assessment, and water conservation approval been obtained?
• Does it have the conditions for grid access and accommodation space?
• Is the technology compliant, funding in place, and secure and reliable?

This means that in the matter of 'being able to generate electricity,' administrative power, energy structure, and market efficiency are all involved in the game at the same time.

Currently, the main power generation entities in China can be roughly divided into three categories:

The first category is the five major power generation groups: State Power Investment Corporation, China Huaneng Group, China Datang Corporation, China Huadian Corporation, and China Energy Investment Corporation. These enterprises control over 60% of the country's centralized thermal power resources and are also actively deploying in the field of new energy. For example, State Power Investment Corporation will add more than 11 million kilowatts of wind power installed capacity by 2024, maintaining a leading position in the industry.

The second type is local state-owned enterprises, such as Three Gorges New Energy, Beijing Energy, and Shaanxi Investment Group. These enterprises are often tied to the local government, play an important role in the local power layout, and undertake certain "policy tasks" at the same time.

The third category is private and mixed ownership enterprises: typical representatives include Longi Green Energy, Suntech Power, Tongwei Co., Ltd., and Tainergy. These enterprises have shown strong competitiveness in sectors such as photovoltaic manufacturing, energy storage integration, and distributed power generation, and have also obtained "priority rights" in some provinces.

But even if you are a leading new energy company, it does not mean that you can "build a power plant" as you wish. The bottlenecks here usually appear in three aspects:

1. Project Metrics

The power generation project needs to be included in the annual plan for local energy development and must obtain the wind and solar project indicators. The allocation of these indicators is essentially a form of local resource control - it is impossible to legally initiate the project without the consent of the local development and reform commission and the energy bureau. Some regions also use a "competitive allocation" method, scoring and selecting based on land conservation, equipment efficiency, energy storage configuration, funding sources, etc.

2. Grid Connection

After the project is approved, you still need to apply for access system evaluation from State Grid or Southern Grid. If the local substation capacity is full, or there is no transmission channel, then your project will be useless. Especially in areas with concentrated new energy sources like the northwest, access and scheduling difficulties are common.

3. Power Absorption Capacity

Even if the project is approved and the line is in place, if the local load is insufficient and the inter-regional passage is not opened, your electricity may also be "unavailable". This leads to the problem of "abandoning wind and light". The National Energy Administration pointed out in a 2024 report that in some cities, due to the concentration of projects far exceeding the load, the access of new energy projects was temporarily suspended.

So, "whether or not to generate electricity" is not only a question of the enterprise's capability, but also a result jointly determined by policy indicators, physical structure of the power grid, and market expectations. Against this background, some enterprises are beginning to shift towards new models such as "distributed photovoltaics," "self-supply in industrial parks," and "industrial and commercial energy storage coupling" to avoid centralized approval and integration bottlenecks.

From the perspective of industry practice, this three-tier structure of "policy access + engineering threshold + dispatch negotiation" determines that China's power generation industry still belongs to a "structural access market", which does not inherently exclude private capital, but it is also difficult to allow pure market-driven.

How is electricity transported?

In the energy sector, there is a widely circulated "power paradox": resources are in the West, electricity is used in the East; electricity is generated but cannot be transmitted.

This is a typical problem of China's energy structure: the northwest has abundant solar and wind resources, but low population density and small industrial load; the eastern region is economically developed with high electricity consumption, but very limited local new energy resources that can be developed.

What should we do? The answer is: build Ultra High Voltage (UHV) power transmission, use the 'electricity expressway' to transmit the wind and solar power in the west to the east.

By the end of 2024, China had put into operation 38 UHV transmission lines, including 18 AC lines and 20 DC lines. Among them, the DC transmission project is particularly crucial because it can achieve low loss and high-capacity directional transmission over extremely long distances. For example:

• Qinghai-Henan ±800kV DC Line: With a length of 1587 kilometers, it transmits power from the photovoltaic base in the Qaidam Basin in Qinghai to the Central Plains urban agglomeration;
• "Changji-Guquan" ±1100kV DC Line: With a length of 3293 kilometers, it sets a dual record for global transmission distance and voltage level.
• "Northern Shaanxi-Wuhan" ± 800kV DC line: serving the energy base of northern Shaanxi and the industrial hinterland of central China, with an annual transmission capacity of more than 66 billion kWh.

Each UHV transmission line is a "national project", which is uniformly approved by the National Development and Reform Commission and the Energy Administration. State Grid or Southern Power Grid is responsible for investment and construction. These projects often involve investment of hundreds of billions of yuan, with a construction period of 2-4 years, and often require inter-provincial coordination, environmental impact assessments, and land acquisition and resettlement cooperation.

So why do we need to do UHV? In fact, behind it is a problem of resource redistribution:

1. Redistribution of space resources

China's scenic resources, population, and industry are seriously misaligned. If the spatial disparity is not bridged through efficient power transmission, all slogans of 'transmitting electricity from the West to the East' are empty talk. UHV is to exchange 'transmission capacity' for 'resource endowment'.

2. Electricity Price Equalization Mechanism

Due to the large difference in the electricity price structure between the resource end and the consumption end, UHV transmission has also become a tool to achieve regional electricity price differential adjustment. The eastern region can obtain relatively low-price green electricity, while the western region can realize energy monetization benefits.

3. Promote the integration of new energy

Without transmission channels, it is easy for the Northwest region to encounter a situation where "more electricity cannot be used" due to abandoned wind and solar energy. Around 2020, the abandonment rates in Gansu, Qinghai, and Xinjiang once exceeded 20%. After the ultra-high voltage is completed, these numbers have dropped to less than 3%, which is a structural relief brought about by the improvement in transmission capacity.

At the national level, it has been made clear that ultra-high voltage is not just a technical issue, but also an important pillar of the country's energy security strategy. Over the next five years, China will continue to deploy dozens of ultra-high voltage lines outlined in the '14th Five-Year Plan for Power Development', including key projects such as Inner Mongolia to Beijing-Tianjin-Hebei, Ningxia to Yangtze River Delta, to further achieve the goal of 'a unified dispatch of the national grid'.

However, it is important to note that although UHV is good, there are also two long-term points of contention:

• High investment, slow return: The investment in a ±800kV DC line often exceeds 20 billion yuan, with a payback period of over 10 years;
• Cross-provincial coordination difficulties: Ultra-high voltage needs to pass through multiple administrative regions, which puts high demands on the coordination mechanism between local governments.

These two issues determine that UHV is still a 'national project' rather than a market infrastructure under the free decision of enterprises. However, it cannot be denied that in the background of rapid expansion of new energy and exacerbated regional structural mismatch, ultra-high voltage is no longer an 'optional', but a 'mandatory option' for the 'Chinese version of the energy internet'.

How to sell electricity?

After generating and sending out electricity, the next core issue is: how to sell the electricity? Who will buy it? How much per kilowatt-hour?

sell to the national grid

But this model has completely fallen apart after the large-scale grid connection of new energy. The marginal cost of photovoltaic and wind power is close to zero, but their output is fluctuating and intermittent, which is not suitable for inclusion in a fixed electricity price, rigid supply and demand electricity planning system. Therefore, it has changed from "whether it can be sold" to the life and death line of the new energy industry.

According to the new regulations that will be implemented starting from 2025, all new energy generation projects nationwide will completely cancel fixed electricity price subsidies and must participate in market-based transactions, including:

• Medium and long-term contract trading: similar to "presale of electricity", power generation companies and power users sign contracts directly, locking in a certain time period, price, and quantity of electricity;
• Spot market trading: Electricity prices may change every 15 minutes according to real-time fluctuations in supply and demand;
• Ancillary Services Market: providing frequency regulation, voltage regulation, reserve and other grid stability services;
• Green Power Trading: Users voluntarily purchase green electricity, accompanied by Green Electricity Certificates (GEC);
• Carbon market trading: Power generation companies can earn additional revenue by reducing carbon emissions.

Several power trading centers have been established nationwide, such as the power trading center limited companies in Beijing, Guangzhou, Hangzhou, Xi'an, etc., responsible for market matching, electricity quantity confirmation, electricity price settlement, etc.

Let's look at an example of a typical spot market:

During the summer heatwave in 2024, Guangdong's electricity spot market experienced extreme fluctuations, with off-peak electricity prices as low as 0.12 yuan/kWh and peak prices reaching up to 1.21 yuan/kWh. Under this mechanism, renewable energy projects that can be flexibly dispatched (e.g., equipped with energy storage) can 'store electricity at low prices and sell electricity at high prices,' earning huge price spread profits.

In contrast, projects that still rely on medium- and long-term contracts but lack peak-shifting capabilities can only sell electricity at a price of about 0.3-0.4 yuan per kilowatt-hour, or even be forced to go online at zero price during some periods of abandoned electricity.

As a result, an increasing number of new energy companies are starting to invest in supporting energy storage, one for grid dispatch response and the other for price arbitrage.

In addition to electricity revenue, new energy companies also have several potential sources of income:

1. Green Electricity Certificate (GEC) trading. In 2024, provinces and cities such as Jiangsu, Guangdong, and Beijing have launched GEC trading platforms, and users (especially large industrial enterprises) purchase GEC for purposes such as carbon disclosure and green procurement. According to the Energy Research Association data, the 2024 GEC transaction price range is 80-130 yuan per MWh, equivalent to about 0.08-0.13 yuan/kWh, which is a major supplement to traditional electricity prices.

2. Carbon market trading. If new energy projects are used to replace coal-fired power and are included in the national carbon emissions trading system, they can earn "carbon assets" income. By the end of 2024, the national carbon market price is about 70 yuan per ton of CO₂, with each kilowatt-hour of green electricity reducing emissions by about 0.8-1.2 kilograms, resulting in theoretical income of around 0.05 yuan per kWh.

3. Peak-valley electricity price regulation and demand response incentives. Power generation companies sign electricity adjustment agreements with high-energy consumers. They can reduce loads during peak periods or feed electricity back to the grid to receive additional subsidies. This mechanism is progressing rapidly in pilot projects in Shandong, Zhejiang, Guangdong, and other regions.

Under this mechanism, the profitability of new energy projects no longer depends on "how much electricity I can generate," but rather on:

• Can I sell at a good price?
• Do I have long-term buyers?
• Can I practice peak shaving and valley filling?
• Do I have energy storage or other regulatory capabilities?
• Do I have any tradable green assets?

The old model of "grabbing indicators and relying on subsidies" has come to an end. In the future, new energy companies must have financial thinking, market operation capabilities, and even manage power assets as meticulously as derivatives.

In a nutshell: The 'selling electricity' segment of new energy is no longer a simple buying and selling relationship, but a systematic engineering game involving electricity as a medium, coordinated with policies, markets, carbon rights, and finance.

Why is there abandoned electricity?

For power generation projects, the biggest risk has never been whether the power plant can be built, but rather whether it can be sold after completion. And 'wasting electricity' is the most silent yet most deadly enemy in this process.

The so-called 'abandonment of electricity' does not mean that you are not generating electricity, but that the electricity you generate has no users, no channels, and no room for scheduling, so it can only be wasted in vain. For a wind power or photovoltaic enterprise, abandoned electricity not only means direct loss of income, but may also affect subsidy applications, electricity accounting, green certificate generation, and even affect subsequent bank ratings and asset revaluation.

According to the statistics of the Northwest Supervision Bureau of the National Energy Administration, in 2020, the wind power curtailment rate in Xinjiang once reached as high as 16.2%, and photovoltaic projects in Gansu, Qinghai, and other places also experienced curtailment rates of over 20%. Although by the end of 2024, these figures had dropped to 2.9% and 2.6% respectively, curtailment is still an unavoidable reality for project developers in certain regions and periods - especially in typical scenarios with high sunlight and low load during noon, where photovoltaic electricity is significantly curtailed by the dispatch system, rendering the generation useless.

Many people may think that abandoning electricity is because "not enough electricity is used", but fundamentally it is a result of imbalance in system scheduling.

First, there is a physical bottleneck: in some resource-concentrated areas, the capacity of the substations has been saturated, and grid access has become the biggest constraint. Projects are approved but cannot be connected to the grid. Second, the dispatch mechanism is rigid. Currently in China, the stability of thermal power units is still the core of dispatching. The uncertainty of new energy output makes dispatching units habitually 'limit access' to avoid system fluctuations. In addition, the coordination of cross-provincial power consumption is delayed, resulting in many cases where although theoretically there is 'demand', the power cannot be 'delivered' due to administrative processes and inter-provincial channels, and ultimately can only be abandoned. The market, on the other hand, operates with a lagging set of rules: the spot electricity market is still in its early stage, auxiliary service mechanisms and price signaling systems are far from perfect, and energy storage regulation and demand response mechanisms have not yet formed on a large scale in most provinces.

At the policy level, there is actually a response.

Since 2021, the National Energy Administration has incorporated the 'assessment of new energy consumption capacity' into the pre-approval of projects, requiring local governments to clarify the 'carrying capacity indicators' in the local area, and proposed in multiple policies for the '14th Five-Year Plan' to promote the integration of source-grid-load-storage, establish local load centers, improve spot market trading mechanisms, and mandatorily allocate energy storage systems for peak shaving. At the same time, many local governments have introduced a 'minimum consumption ratio' responsibility system, specifying that the annual utilization hours of new energy grid-connected projects shall not be lower than the national benchmark, urging project parties to consider adjustment measures in advance. Although these measures are in the right direction, the implementation progress still lags behind significantly - in many cities with a surge in new energy installation, issues such as delayed grid upgrades, slow deployment of energy storage, and unclear regional dispatching rights are still common, and the pace of institutional promotion and market coordination remains mismatched.

More importantly, behind the abandonment of electricity is not simply 'economically inefficient,' but a conflict of resource space and institutional structure. The Northwest has abundant electricity resources, but their development value depends on the cross-provincial and cross-regional grid transmission and dispatch system, while China's current administrative divisions and market boundaries are highly fragmented. This leads to a large amount of 'technically available' electricity that has nowhere to be accommodated institutionally, becoming a kind of passive redundancy.

Why can't China's electricity be used for cryptocurrency mining?

While a large amount of 'technically available but institutionally homeless' electricity remains idle, a previously marginalized electricity usage scenario - cryptocurrency mining, has been emerging in an underground and guerrilla-like manner in recent years, and has regained a 'structurally needed' position in certain regions.

This is not accidental, but a natural product of some kind of structural gap. Cryptocurrency mining, as a real-time computing power behavior with high power consumption and low continuous interference, operates logically compatible with abandoned wind and solar power generation projects. Mining farms do not need stable scheduling guarantees, do not require grid connection, and can even actively cooperate with scheduling to cut peaks and fill valleys. More importantly, it can convert unwanted electricity into chain assets outside the market, forming a pathway for "redundant realization".

From a purely technical perspective, this is an improvement in energy efficiency; but from a policy perspective, it always remains in an awkward position.

The mainland Chinese government halted mining in 2021, not because of the electricity itself, but due to the financial risks and industrial orientation behind it. The former concerns the opacity of the path of crypto assets, which can easily lead to regulatory challenges such as illegal fundraising and cross-border arbitrage; the latter involves the evaluation of the industry as 'high energy consumption and low output', which does not align with the current strategic focus on energy saving and carbon reduction.

In other words, whether mining is a 'reasonable burden' does not depend on whether it absorbs power redundancy, but on whether it is included in the 'acceptable structure' of the policy context. If it still exists in an opaque, non-compliant, and uncontrollable manner, then it can only be classified as a 'gray burden'; but if it can be limited to a specific region, power source, electricity price, and on-chain usage, designed within a compliant framework as a special energy export mechanism, it may not necessarily be excluded from the policy.

This kind of redesign is not unprecedented. Internationally, countries such as Kazakhstan, Iran, and Georgia have long incorporated "computing power load" into their power balance systems, and even guided mines to bring USDT or USDC and other digital assets to the country as alternative foreign exchange reserves through the method of "electricity in exchange for stablecoins". In the energy structure of these countries, mining has been redefined as a "strategic adjustable load", serving both power grid regulation and currency system restructuring.

In China, although it is not possible to mimic this radical approach, is it possible to partially, limitedly, and conditionally restore the existence right of mining farms? Especially in the stage where the pressure of abandoned electricity continues and green electricity cannot be fully marketized in the short term, treating mining farms as a transitional mechanism for energy consumption and allocating Bitcoin as an on-chain asset reserve in a closed manner may be closer to reality than a one-size-fits-all shutdown and better serve the country's long-term digital asset strategy.

This is not only a reevaluation of mining, but also a redefinition of the "value boundary of electricity".

In the traditional system, the value of electricity depends on who buys and how to buy; while in the chain world, the value of electricity may directly correspond to a segment of computing power, a type of asset, or a path to participate in the global market. As the country gradually builds AI computing power infrastructure, promotes the development of digital technology, and establishes the digital RMB system, should we also reserve a technology-neutral, compliant, and controllable channel for a "chain energy monetization mechanism" on the policy blueprint?

Bitcoin mining may be China's first practice scenario of converting energy into digital assets in a 'no middleman' state - a sensitive, complex, but unavoidable issue.

Conclusion: The ownership of electricity is a real choice question

China's power system is not backward. Wind energy covers the Gobi Desert, sunlight shines on the sand dunes, ultra-high voltage crosses thousands of miles of wilderness, and delivers electricity from the border to high-rise buildings and data centers in eastern cities.

In the digital age, electricity is no longer just the fuel for lighting and industry; it is becoming the infrastructure for value calculation, the root of data sovereignty, and the most important variable when the new financial order is being reorganized. Understanding the flow of 'electricity' is, to some extent, understanding how institutions set qualification boundaries. The destination of a unit of electricity is never naturally determined by the market; it involves countless decisions. Electricity is not distributed evenly; it always flows into the hands of those permitted, into recognized scenarios, and into accepted narratives.

The core of the Bitcoin mining controversy is not whether it consumes electricity, but whether we are willing to acknowledge it as a "reasonable existence" - a usage scenario that can be incorporated into national energy scheduling. As long as it is not recognized, it can only operate in the gray area and in the crevices; but once it is identified, it must be institutionally placed - with boundaries, conditions, interpretive power, and regulatory principles.

This is not about loosening or blocking an industry, but a system's attitude towards "unconventional loads".

And we, are standing at this fork in the road, watching this choice quietly happening.

Reference materials

[1] China Government Website, "2024 National Electricity Industry Statistics Data", January 2025.

[2] IEA, 'Renewables 2024 Global Report', January 2025.

[3] National Energy Administration, Appendix to the '2024 Energy Operation Report'.

[4] National Development and Reform Commission Energy Institute, "Shago Desert" landscape base construction progress, December 2024.

[5] National Development and Reform Commission, "Interim Measures for the Administration of Renewable Energy Power Generation Projects", 2023.

[6] Reuters, "Evaluation Report of China's UHV Power Transmission System", May 2025.

[7] Infolink Group, "Analysis of China's New Energy Cancellation of Fixed Electricity Price Subsidies", March 2025.

[8] National Power Dispatching Center, "North China Power Spot Market Operation Bulletin (2024)".

[9] REDex Insight, "China's Unified Electricity Market Roadmap", December 2024.

[10] China Electricity Enterprise Association, Appendix to the '2024 Annual Electricity Industry Report'.

[11] State Energy Administration Northwest Supervision Bureau, 'Northwest Abandoned Wind and Abandoned Light Situation Bulletin', December 2024.

[12] Energy Research Association, "Observation Report on Green Electricity Certificate Trading Pilot, January 2025."

[13] CoinDesk, "Analysis of Kazakhstan's Mining Policy Adjustment", December 2023.